The Effects of Competition on Educational Outcomes. ERIC Digest.

Competition exists when vendors of a service are available to meet the demands of customers. In the education sector, parents and children are consumers, and schools and districts are the suppliers. Theoretically, more competition should translate into higher quality schooling and enhanced educational outcomes. This digest reviews the literature that examines the relationship between competition and quality. In the U.S., parents may choose between public-school districts, among public-school districts, and among public schools within a given district. Generally, when there are more choices, there is more competition. Measuring competition's effect on educational outcomes, however, is not clear-cut. Measures include the Herfindahl Index, percentage of students in private schools, and student test scores. Greater competition raises test scores, but only modestly. It seems to improve educational attainment (years in school), increase graduation rates, and raise students' future earnings. This evidence needs to be considered carefully because bias may exist from cross-sectional experimental research design, and also from double-counting findings or overestimating effects. Increasing competition may raise effectiveness and efficiency of public schools, though not dramatically. Equity issues must be considered. If low-income families benefit most, then these reforms may be redistributive. (RT)